The Question Is, ‘What Is A Recovery In California?’
The LA Daily News reports from California “Home sales in the San Fernando Valley plunged a record 35 percent last year to their lowest level in more than two decades as fewer buyers qualified for loans amid the ongoing mortgage meltdown, the Southland Regional Association of Realtors said. Annual home sales in 2007 fell to their lowest level since record-keeping began in 1985. December sales fell an annual 51.6 percent, to 390 transactions. Condominium sales fell 55.6 percent.”
“At the end of December, 5,671 properties were listed for sale in the Valley, a nearly 11-month supply.”
“In December, the median price dipped to $557,000, an annual loss of 12.4 percent, or $76,000. The median price topped out at $655,000 last June and has fallen 15 percent since then - back to levels last seen in the second quarter of 2005. It declined and finished below $600,000 each month of the year’s final quarter, the group said.”
“‘I don’t think the Valley will be as impacted as the rest of the state or nation,’ Jim Link, executive VP of the Realtors group, said of the foreclosure situation. ‘There will be an impact on prices but I don’t think they will tumble 20 (percent) or 30 percent.’”
“‘Banks are not going to dramatically slash prices and take a huge loss,’ Link said. ‘Banks want to recoup their investment, and that means they will list properties competitively at prices below comparable homes, but certainly not at fire-sale prices.’”
“Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., said he expects activity this year to mirror that of 2007. ‘I don’t think we will see any signs of a recovery in the upcoming months,’ he said. ‘Then the question is what is a recovery. Unit sales will start to tick up and prices will start to tick up but it won’t be double-digit (percentage) increases.’”
The Signal. “Just under 2,000 single-family homes sold in the Santa Clarita Valley in 2007, making it the lowest annual total since at least 1998, according to a report released from the Southland Regional Association of Realtors.
“The annual median price of homes also fell for the first time on record, as well as the annual tally of sold condominiums in the valley. Three of the last four years have posted sales declines after six consecutive years of typically double-digit increases in sales, according to the association.”
“In the report, Doreen Chastain-Shine, 2008 president of the Association’s Santa Clarita Valley Division said, ‘I truly do not expect resale prices to go down all that much. Still, sellers don’t want to believe what’s happening, that the market has shifted in favor of buyers. Sellers are still not being realistic.’”
“At the end of December, there were 2,100 active listings throughout the Santa Clarita Valley, up 9.4 percent from a year ago, the association reports. At the current pace of sales, the inventory represents a 12.7-month supply, continuing the buyers’ market.”
“‘The mindset that real estate values never go down simply is not true,’ Link said. ‘Like any commodity, real estate has its peaks and valleys, but over time owning a home in California has always been a solid investment that continues to increase in value.’”
From The Sun. “You wouldn’t expect to see home developers using independent real-estate agents to sell new houses in a hot market. Besides: If the price is right, and interest rates low, why should they? Those days are long gone.”
“The new home market has taken such a beating that big-name builders are rewarding outside real-estate agents with Starbucks gift cards, wine bottles and even $10,000 checks to sell homes as fast as possible, and rewarding buyers with new cars and major discounts.”
“Take Janey Cole, for instance. The real estate agent with Redlands-based Century 21 Lois Lauer Realty won $10,000 on Monday from a drawing she was placed into by Beazer Homes because she recently sold a home in the builder’s Redlands Village project. She’s never seen an incentive like this one.”
“‘Any time the market gets like this, all the builders out there who never really offer us anything … start courting us a lot more,’ Cole said. ‘What that says to me is: ‘Here’s our inventory - get rid of it.’ They must be under some big gun because they’re spending money to do this.’”
“Toll Bros. - with new homes in Ontario, Rancho Cucamonga, San Bernardino and Highland - is another case in point. Cole’s name was randomly drawn yet again, and she’s now looking forward to a free one-hour counseling session with a top-notch Toll Bros. selling representative. It’s worth $350.”
“‘They’re doing whatever they can to sell homes,’ she said.”
“Buyers are being targeted, too. Whoever purchases one of two houses in La Verne represented by Century 21 Masters of Glendora gets their choice of owning a new Toyota Prius or having $25,000 slashed off the sale price.”
“The house for sale on Fruit Street is going for about $599,000, and the one on Emerald Avenue for about $689,000.”
“‘In this market, with the massive amount of inventory available and what may be a tsunami of upcoming foreclosures, we have to cause that property to be a standout,’ said Mark Cofer, real-estate broker for the homes.”
“Building industry expert Frank Williams said dozens of builders with new housing tracts across the Inland Empire will keep offering these ‘creative’” incentives.”
“‘The builders are anxious to get rid of their inventory, and they want as many people out there selling homes as they can get their hands on,’ said Williams, the CEO of the Rancho Cucamonga-based Baldy View Chapter of the Building Industry Association of Southern California. ‘They need to get rid of inventory, so they’re pulling out all the stops.’”
The LA Times. “Shares of Standard Pacific Corp., the Irvine builder that has lost more than three-quarters of its value in the last year, rose after getting a waiver from lenders to avoid a default. Banks extended loan terms until March 30, Standard Pacific said in a regulatory filing Tuesday. The company said Monday that it cut debt and inventory in the fourth quarter and fiscal year.”
“The housing market remains challenging and it’s ‘hard to predict’ a recovery, Standard Pacific CEO Stephen Scarborough said. The company has been hampered because it gets most of its revenue from California, where existing home sales fell 33% in December.”
“‘In many of our markets we’ve seen considerable erosion of pricing, particularly in the California, Arizona and Florida markets,’ Scarborough said. ‘In many markets, we’ve gone back to 2004 pricing.’”
The Voice of San Diego. ” If you’re sick of paying your mortgage while your house loses value, just walk away. That abandon-ship advice, phrased a variety of ways, isn’t relegated to the societal fringes anymore.”
“People shouldn’t get into or out of housing contracts just to make or avoid losing money, said Gabe del Rio, director of a nonprofit consortium of homeownership and housing counseling groups.”
“‘Housing prices have always gone up and fallen and gone back up again — putting a timeline to it intelligently is impossible,’ del Rio said. ‘If you’re buying a home for an investment, that’s not the reason we recommend. It should be so that it’s your home. Whether or not it has equity in it, it’s actually pointless.’”
“The up-and-down equity watching was far from the mind of one University City homeowner, who bought a one-bedroom condo there in May 2004. He financed it 100 percent, planning to stay in the unit for at least two years before selling and maybe moving up.”
“But the market stopped ascending and his family grew and now the homeowner is weighing his options. He asked for his name to be withheld to avoid the stigma, and potential legal implications, while he contemplates foreclosure.”
“After buying the condo, he got married, and when his wife became pregnant a year ago, they knew the condo wouldn’t be enough space. At that point, the unit would’ve sold for about $30,000 to $40,000 less than he’d paid.”
“He decided to hang on to the unit and hope for a market turnaround. In the meantime, he moved out with his wife and baby, and they lease the condo to a tenant for about $1,000 a month less than they pay for the interest-only option on their monthly mortgage payment, while also paying their rent elsewhere.”
“Every once in a while, he checks online to see what comparable units are selling for. The value has dropped to about two-thirds of what he paid now, he estimated.”
“‘This is so much beyond my worst expectations,’ he said. ‘I don’t see it coming back anytime soon. Is it going to take five years, 10 years, just to get back to where it was then?’”
“He joins a growing group of people facing the leave-or-stay quandary. ‘I want to honor what I signed,’ he said. ‘But I have to make a business decision that I have to make for my family.’”
From CNN Money. “‘I stopped paying my mortgage in October, after shelling out about $70,000 in interest [over 15 months],’ said one borrower, David, who doesn’t want his last name used. ‘Now, I’m just waiting for the default notice.’”
“The Los Angeles-based writer bought two properties in Hancock Park, west of downtown, using no-down, interest-only mortgages in 2006. He paid just over $1 million for both.”
“David had planned to sell them quickly but got caught in the slump. Soon his interest rate will jump by a few points, and his payments will go up by several hundred dollars a month for each place. He figures his properties have fallen in value by at least $60,000 each.”
“And now skipping out on a home is easier, thanks to the Mortgage Debt Relief Act of 2007. Previously, if a bank sold a foreclosed home for less than the mortgage balance and it forgave the difference, the borrower had to pay tax on that difference as if it were income. Now the IRS will ignore it.”
“‘That’s going to help a lot of people,’ said Mike Gray, a San Jose accountant.”
“The trend of walking away is most pronounced among real estate investors, according to Jay Brinkman, an economist with the Mortgage Bankers Association (MBA). But families are doing it too. ‘If they have to stretch to make mortgage payments for a home that will not recover its value, then yes, they may walk away,’ he said.”
“HouseBuyerNetwork.com CEO Duane LeGate says that Susan’s (not her real name) two-bedroom condo in Sonoma County is worth $340,000, but the mortgage balance is $380,000. She can’t refinance and it’s difficult to sell.”
“She’s still trying for a short sale but, said LeGate, ‘She’ll almost certainly end up walking away.’”
From Forbes. “Even Hollywood’s rich and famous can’t avoid the housing downturn that’s sweeping the nation. In Los Angeles, only 4,430 homes were sold in December, down 48% from the previous year. And prices fell 11% to an average $470,000.”
“Of course, celebrity homes cost much more than that. An entry-level house for an up-and-coming star costs at least $1.4 million in L.A., say experts. Realtor Barry Sloane of Sotheby’s International Realty says it’s the owners trying to sell homes in the $3 million to $6 million range that are having the most trouble.”
“‘A lot of those people are involved, in one way or another, with the strike,’ says Sloane. ‘They’re upgrading from lesser houses that they’re having trouble selling because of the market, so it’s like a domino effect.’”
“Young rocker Avril Lavigne has had to reduce the price on her five-bedroom, six-bath house in Beverly Hills from $6.9 million to $5.8 million. The property is currently in escrow. Since she put the house on the market in February 2007, two offers have fallen through.”
“Former Guns N’ Roses guitarist Slash (also known as Saul Hudson) feels he overpaid for his Spanish-style Hollywood Hills home, which has a pool, a separate gym and stunning views. He bought the house in January 2006 for $6.2 million. He sold it last December for $5.7 million.”
“Slash is suing his former real estate agent, claiming the house was neither as big nor as private as the agent claimed.”
“Television star Wilmer Valderrama had to accept $200,000 less for his five-bedroom home in the relatively unfashionable Valley neighborhood of Tarzana. He sold the house in January for $1.75 million.”
“Johnny Carson sidekick Ed McMahon is also having real estate troubles. He put his 7,000-square-foot Beverly Hills home on the market In July 2006 for $7.7 million. He has since reduced the price three times, and the house is now selling for $5.7 million.”
“Sloane was originally trying to privately sell a historic Neutra home on Mulholland Drive, owned by Vidal Sassoon, for $25 million. When an offer fell through, he lowered the listing to $20 million. That was a year ago.”
“‘There’s usually a waiting list for homes over $20 million,’ says Sloane. ‘Now, it’s slowing down a tiny bit–for the first time in years.’”
From KSBY 6. “Senator Hillary Clinton addressed Central Coast voters this Super Tuesday. In her only local one-on-one interview, the former First Lady talked exclusively with Action News reporter Carina Corral about issues like immigration, the housing crisis, and her daughter’s stop here last week.”
“I asked Senator Clinton, ‘As President, what would you do to make housing more affordable in California?’”
“The senator’s answer was, ‘Well, I’m the only candidate in either party who has a specific plan. I will have a moratorium on home foreclosures for 90 days to help people work out staying in their homes, and I would freeze interest rates for five years.’”